The Importance Of Technology In Economic Growth

3.Technology power

One of the most important factors that enabled a nation’s economic growth is the ability of the people to successfully absorb knowledge and skills from mature technology and then improving those techniques to fit their economy. The economic miracle did not occur simply from the reform policies, but the substantial upgrade of technology.

Many works of literature have studied the relationship between technology and economic growth. Technology determines the physical quantity of output that can be reached and how much contribute to economic growth. In other words, technology can be transformed into productivity gaining by an increase in efficiency and reduction costs. (Hall, 2011) Solow (1956) in his studies illustrated how

For instance, in recent years, new public services have become available online and through mobile phones. Information Communication technology enables the emergence of a new sector: the app industry. Research shows that the aggregate value of Facebook app economy exceeds $12 billion.

Furthermore, economists argue that technology without business application has no value.

Technology is a vital source of economic growth and high production. Research and Development (R&D) plays a crucial role to accelerate the technology progress. (Linda R.

Cohen and Roger G, 1991)

The so-called “new growth theory” emphasizes that economic growth is also promoted by the stock of human capital. Because people in businesses hold knowledge or innovative ideas. This is another reason Chinese government has spent vast sums of R&D fund in universities, technical labs, research institutions since 1978. Empirical evidence suggests that the social return to R&D spending on new technologies is as much as 50% to 100%. (Zvi Griliches,

(Irwin, 2002) Thanks to the emerging market like China, outsourcing of production processes became possible and led to a rise in both advanced nations and emerging nations.

Tracing back the evolution of the theory of global trade, Adam Smith indicated that one country would have an absolute advantage over the other if it can produce the same amount of goods with few resources. (Smith, 1776)

Besides, in Smith’s England once time, with the rapid growth of large-scale industries and captive markets in overseas colonies, had a solid base for lower labor costs and higher efficiency in production, which ensured its competition across the world at that time.

Another English economist, David Ricardo (1951) suggested that industry specialization combined with free trade produces positive results. It was the comparative and not absolute advantage, which was considered necessary to ensure mutually profitable trade across nations regarding labor hours used per unit of